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Horizon Bancorp, Inc. Reports Third Quarter 2024 Results, Including EPS of $0.41 and Continued Profitability Improvement, as well as Accretive Balance Sheet Initiatives
Source: Nasdaq GlobeNewswire / 23 Oct 2024 15:15:01 America/Chicago
MICHIGAN CITY, Ind., Oct. 23, 2024 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”), the parent company of Horizon Bank (the “Bank”), announced its unaudited financial results for the three and nine months ended September 30, 2024.
Net income for the three months ended September 30, 2024 was $18.2 million, or $0.41 per diluted share, compared to net income of $14.1 million, or $0.32, for the second quarter of 2024 and compared to net income of $16.2 million, or $0.37 per diluted share, for the third quarter of 2023.
Net income for the nine months ended September 30, 2024 was $46.3 million, or $1.05 per diluted share, compared to net income of $53.2 million, or $1.21, for the nine months ended September 30, 2023.
Third Quarter 2024 Highlights
- Net interest income increased for the fourth consecutive quarter to $46.9 million, compared to $45.3 million in the linked quarter of 2024. Net interest margin, on a fully taxable equivalent ("FTE") basis1, expanded for the fourth consecutive quarter to 2.66%, compared to 2.64% in the linked quarter of 2024.
- Total loans held for investment ("HFI") were $4.8 billion at September 30, 2024, relatively unchanged from June 30, 2024 balances. However, consistent with the Company's stated growth strategy, the commercial portfolio showed continued organic growth momentum during the quarter, which was offset with planned run-off of lower-yielding indirect auto loans in the consumer loan portfolio.
- Positive deposit growth of 1.7% during the quarter, to $5.7 billion at period end. The quarter was highlighted by stable non-interest bearing deposit balances and growth in core relationship consumer and commercial portfolios.
- Credit quality remains strong, with annualized net charge offs of 0.03% of average loans during the third quarter. Non-performing assets to total assets of 0.32% remains well within expected ranges, with no material change in the loss outlook. Provision for loan losses of $1.0 million reflects continued positive credit performance.
“Horizon continues to execute well on its key strategic initiatives of consistently improving our operating performance through a more productive balance sheet, growth in non-interest income and continued disciplined in our operating model. As a result, we are optimistic on the positive momentum of the franchise through year-end 2024 and into 2025. During the quarter, our commercial team was able to deliver another quarter of quality loan growth, even coming off a strong end to the second quarter. The strength of Horizon's core deposit franchise showed solid performance, and our credit metrics remain well managed. These efforts led to a third consecutive quarter of sequential growth in pre-tax pre-provision income," President and Chief Executive Officer Thomas M. Prame said. "Importantly, we continue our efforts to optimize our business model, and are pleased to announce the repositioning of a portion of our securities portfolio and the intended sale of our mortgage warehouse business during the fourth quarter. These shareholder accretive actions are expected to yield sustainable improvement in the profitability of our business that will be evident in the fourth quarter, and positively impact Horizon's financial performance in 2025."
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Accretive Fourth Quarter 2024 Strategic Actions
Horizon announced strategic actions taking place in the fourth quarter of 2024, which are designed to simplify its business, strengthen the balance sheet and improve long-term structural profitability. In October, the Company completed the repositioning of about $325 million of available-for-sale securities. Additionally, the Company has signed a letter of intent to sell its mortgage warehouse business, which is expected to generate a gain-on-sale. Details on these actions, the use of proceeds, and the expected financial impact are available in the Company's third quarter 2024 investor presentation published at investor.horizonbank.com.
Financial Highlights (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Income statement: Net interest income $ 46,910 $ 45,279 $ 43,288 $ 42,257 $ 42,090 Credit loss expense 1,044 2,369 805 1,274 263 Non-interest income 11,511 10,485 9,929 (20,449 ) 11,830 Non-interest expense 39,272 37,522 37,107 39,330 36,168 Income tax expense (75 ) 1,733 1,314 6,419 1,284 Net income $ 18,180 $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 Per share data: Basic earnings per share $ 0.42 $ 0.32 $ 0.32 $ (0.58 ) $ 0.37 Diluted earnings per share 0.41 0.32 0.32 (0.58 ) 0.37 Cash dividends declared per common share 0.16 0.16 0.16 0.16 0.16 Book value per common share 17.27 16.62 16.49 16.47 15.89 Market value - high 16.57 12.74 14.44 14.65 12.68 Market value - low 11.89 11.29 11.75 9.33 9.90 Weighted average shares outstanding - Basic 43,712,059 43,712,059 43,663,610 43,649,585 43,646,609 Weighted average shares outstanding - Diluted 44,112,321 43,987,187 43,874,036 43,649,585 43,796,069 Common shares outstanding (end of period) 43,712,059 43,712,059 43,726,380 43,652,063 43,648,501 Key ratios: Return on average assets 0.92 % 0.73 % 0.72 % (1.27) % 0.81 % Return on average stockholders' equity 9.80 7.83 7.76 (14.23 ) 8.99 Total equity to total assets 9.52 9.18 9.18 9.06 8.71 Total loans to deposit ratio 83.92 85.70 82.78 78.01 76.52 Allowance for credit losses to HFI loans 1.10 1.08 1.09 1.13 1.14 Annualized net charge-offs of average total loans(1) 0.03 0.05 0.04 0.07 0.07 Efficiency ratio 67.22 67.29 69.73 180.35 67.08 Key metrics (Non-GAAP)(2) : Net FTE interest margin 2.66 % 2.64 % 2.50 % 2.43 % 2.41 % Return on average tangible common equity 12.65 10.18 10.11 (18.76 ) 11.79 Tangible common equity to tangible assets 7.58 7.22 7.20 7.08 6.72 Tangible book value per common share $ 13.46 $ 12.80 $ 12.65 $ 12.60 $ 12.00 (1) Average total loans includes loans held for investment and held for sale. (2) Non-GAAP financial metrics. See non-GAAP reconciliation included herein for the most directly comparable GAAP measures. Income Statement Highlights
Net Interest Income
Net interest income was $46.9 million in the third quarter of 2024, compared to $45.3 million in the second quarter of 2024, driven by net growth in average interest earning assets of $117.5 million and continued net FTE interest margin expansion during the quarter. Horizon’s net FTE interest margin1 was 2.66% for the third quarter of 2024, compared to 2.64% for the second quarter of 2024, attributable to the favorable mix shift in average interest earning assets toward higher-yielding loans and in the average funding mix toward lower-cost deposit balances. Interest accretion from the fair value of acquired loans did not contribute significantly to the third quarter net interest income, or net FTE interest margin.
Provision for Credit Losses
During the third quarter of 2024, the Company recorded a provision for credit losses of $1.0 million. This compares to a provision for credit losses of $2.4 million during the second quarter of 2024, and $0.3 million during the third quarter of 2023. The decrease in the provision for credit losses during the third quarter of 2024 when compared with the second quarter of 2024 was primarily attributable to less total loan growth in the current quarter relative to the prior quarter.
For the third quarter of 2024, the allowance for credit losses included net charge-offs of $0.4 million, or an annualized 0.03% of average loans outstanding, compared to net charge-offs of $0.6 million, or an annualized 0.05% of average loans outstanding for the second quarter of 2024, and net charge-offs of $0.7 million, or an annualized 0.07% of average loans outstanding, in the third quarter of 2023.
The Company’s allowance for credit losses as a percentage of period-end loans HFI was 1.10% at September 30, 2024, compared to 1.08% at June 30, 2024 and 1.14% at September 30, 2023.
Non-Interest Income
For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (Dollars in Thousands) 2024 2024 2024 2023 2023 Non-interest Income Service charges on deposit accounts $ 3,320 $ 3,130 $ 3,214 $ 3,092 $ 3,086 Wire transfer fees 123 113 101 103 120 Interchange fees 3,511 3,826 3,109 3,224 3,186 Fiduciary activities 1,394 1,372 1,315 1,352 1,206 Gains (losses) on sale of investment securities — — — (31,572 ) — Gain on sale of mortgage loans 1,622 896 626 951 1,582 Mortgage servicing income net of impairment 412 450 439 724 631 Increase in cash value of bank owned life insurance 349 318 298 658 1,055 Other income 780 380 827 1,019 964 Total non-interest income $ 11,511 $ 10,485 $ 9,929 $ (20,449 ) $ 11,830 Total non-interest income was $11.5 million in the third quarter of 2024, compared to $10.5 million in the second quarter of 2024, due primarily to higher realized gains on sale of mortgage loans and increased other income.
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Non-Interest Expense
For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (Dollars in Thousands) 2024 2024 2024 2023 2023 Non-interest Expense Salaries and employee benefits $ 21,829 $ 20,583 $ 20,268 $ 21,877 $ 20,058 Net occupancy expenses 3,207 3,192 3,546 3,260 3,283 Data processing 2,977 2,579 2,464 2,942 2,999 Professional fees 676 714 607 772 707 Outside services and consultants 3,677 3,058 3,359 2,394 2,316 Loan expense 1,034 1,038 719 1,345 1,120 FDIC insurance expense 1,204 1,315 1,320 1,200 1,300 Core deposit intangible amortization 844 844 872 903 903 Other losses 297 515 16 508 188 Other expense 3,527 3,684 3,936 4,129 3,294 Total non-interest expense $ 39,272 $ 37,522 $ 37,107 $ 39,330 $ 36,168 Total non-interest expense was $39.3 million in the third quarter of 2024, compared with $37.5 million in the second quarter of 2024. The increase in non-interest expense during the third quarter of 2024 was primarily driven by a $1.2 million increase in salaries and employee benefits expense, which is partially attributable to a legacy benefits program expense, and a $0.6 million increase in outside services and consultants expense related to strategic initiatives.
Income Taxes
Horizon's effective tax rate was -0.4% for the third quarter of 2024, as compared to 10.9% for the second quarter of 2024. The decrease in the effective tax rate during the third quarter was primarily due to an increase in net realizable tax credits for the current year, which reduced the Company's estimated annual effective tax rate.
Balance Sheet
Total assets increased by $14.9 million, or 0.2%, to $7.93 billion as of September 30, 2024, from $7.91 billion as of June 30, 2024. The increase in total assets is primarily due to increases in federal funds sold of $79.5 million, or 230.6%, to $113.9 million as of September 30, 2024, compared to $34.5 million as of June 30, 2024. The increase in federal funds sold during the period was partially offset by a decrease in other assets of $46.6 million, or 28.1%, to $119.0 million as of September 30, 2024, from $165.7 million as of June 30, 2024.
Total investment securities remained unchanged, at $2.4 billion as of September 30, 2024, compared to June 30, 2024, as the positive market impact to available for sale securities was offset by normal pay-downs and maturities. There were no purchases of investment securities during the third quarter of 2024.
Total loans HFI and loans held for sale were relatively consistent at $4.8 billion as of September 30, 2024 compared to $4.8 billion as of June 30, 2024, as growth in commercial loans of $9.5 million were offset by a decline in consumer loans of $43.3 million.
Total deposit balances increased by $96.9 million, or 1.7%, to $5.7 billion as of September 30, 2024 when compared to balances as of June 30, 2024. Non-interest bearing deposit balances were essentially unchanged during the quarter.
Total borrowings decreased by $86.4 million, or 7.0%, to $1.1 billion as of September 30, 2024, primarily related to the repayment of a portion of Federal Home Loan Bank advances, when compared to balances as of June 30, 2024.
Capital
The following table presents the consolidated regulatory capital ratios of the Company for the previous three quarters:
For the Quarter Ended September 30, June 30, March 31, December 31, 2024* 2024 2024** 2023** Consolidated Capital Ratios Total capital (to risk-weighted assets) 13.52 % 13.41 % 13.75 % 14.04 % Tier 1 capital (to risk-weighted assets) 11.70 % 11.59 % 11.89 % 12.13 % Common equity tier 1 capital (to risk-weighted assets) 10.74 % 10.63 % 10.89 % 11.11 % Tier 1 capital (to average assets) 9.01 % 9.02 % 8.91 % 8.61 % *Preliminary estimate - may be subject to change **Prior periods were previously revised (see disclosure in Form 10-Q for the quarterly period ending June 30, 2024) As of September 30, 2024, the ratio of total stockholders’ equity to total assets is 9.52%. Book value per common share was $17.27, increasing $0.65 during the third quarter of 2024.
Tangible common equity1 totaled $588.5 million at September 30, 2024, and the ratio of tangible common equity to tangible assets1 was 7.58% at September 30, 2024, up from 7.22% at June 30, 2024. Tangible book value, which excludes intangible assets from total equity, per common share1 was $13.46, increasing $0.66 during the third quarter of 2024.
Credit Quality
As of September 30, 2024, total non-accrual loans increased by $5.3 million, or 29.0%, from June 30, 2024, to 0.49% of total loans HFI. Total non-performing assets increased $5.1 million, or 25.0%, to $25.6 million, compared to $20.5 million as of June 30, 2024. The ratio of non-performing assets to total assets increased to 0.32% compared to 0.26% as of June 30, 2024.
As of September 30, 2024, net charge-offs decreased by $0.2 million to $0.4 million, compared to $0.6 million as of June 30, 2024 and remain just 0.03% annualized of average loans.
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1 Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure.Earnings Conference Call
As previously announced, Horizon will host a conference call to review its third quarter financial results and operating performance.
Participants may access the live conference call on October 24, 2024 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833-974-2379 from the United States, 866-450-4696 from Canada or 1-412-317-5772 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.
A telephone replay of the call will be available approximately one hour after the end of the conference through November 1, 2024. The replay may be accessed by dialing 877-344-7529 from the United States, 855-669-9658 from Canada or 1–412–317-0088 from other international locations, and entering the access code 9847279.
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion-asset commercial bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon's retail offerings include prime residential and other secured consumer lending to in-market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in-market business banking and treasury management services, as well as equipment financing solutions for customers regionally and nationally, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana's Michigan City, is available at horizonbank.com and investor.horizonbank.com.
Use of Non-GAAP Financial Measures
Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non-GAAP financial measures relating to net income, diluted earnings per share, pre-tax, pre-provision net income, net interest margin, tangible stockholders’ equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and return on average tangible equity. In each case, we have identified special circumstances that we consider to be non-recurring and have excluded them. We believe that this shows the impact of such events as acquisition-related purchase accounting adjustments and swap termination fees, among others we have identified in our reconciliations. Horizon believes these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non-GAAP information identified herein and its most comparable GAAP measures.
Forward Looking Statements
This press release may contain forward–looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon Bancorp, Inc. and its affiliates (collectively, “Horizon”). For these statements, Horizon claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission (the “SEC”). Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.
Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: current financial conditions within the banking industry; changes in the level and volatility of interest rates, changes in spreads on earning assets and changes in interest bearing liabilities; increased interest rate sensitivity; the aggregate effects of elevated inflation levels in recent years; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon’s assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; macroeconomic conditions and their impact on Horizon and its customers; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict and the Israel and Hamas conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K) filed with the SEC and available at the SEC’s website (www.sec.gov). Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
Condensed Consolidated Statements of Income (Dollars in Thousands Except Per Share Data, Unaudited) Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, September 30, 2024 2024 2024 2023 2023 2024 2023 Interest Income Loans receivable $ 75,488 $ 71,880 $ 66,954 $ 65,583 $ 63,003 $ 214,322 $ 178,961 Investment securities - taxable 8,133 7,986 7,362 8,157 8,788 23,481 26,253 Investment securities - tax-exempt 6,310 6,377 6,451 6,767 7,002 19,138 21,617 Other 957 738 4,497 3,007 1,332 6,192 1,960 Total interest income 90,888 86,981 85,264 83,514 80,125 263,133 228,791 Interest Expense Deposits 30,787 28,447 27,990 27,376 24,704 87,224 58,481 Borrowed funds 11,131 11,213 11,930 11,765 11,224 34,274 30,713 Subordinated notes 830 829 831 870 880 2,490 2,641 Junior subordinated debentures issued to capital trusts 1,230 1,213 1,225 1,246 1,227 3,668 3,469 Total interest expense 43,978 41,702 41,976 41,257 38,035 127,656 95,304 Net Interest Income 46,910 45,279 43,288 42,257 42,090 135,477 133,487 Provision for loan losses 1,044 2,369 805 1,274 263 4,218 1,185 Net Interest Income after Provision for Loan Losses 45,866 42,910 42,483 40,983 41,827 131,259 132,302 Non-interest Income Service charges on deposit accounts 3,320 3,130 3,214 3,092 3,086 9,664 9,135 Wire transfer fees 123 113 101 103 120 337 345 Interchange fees 3,511 3,826 3,109 3,224 3,186 10,446 9,637 Fiduciary activities 1,394 1,372 1,315 1,352 1,206 4,081 3,728 Gains (losses) on sale of investment securities — — — (31,572 ) — — (480 ) Gain on sale of mortgage loans 1,622 896 626 951 1,582 3,144 3,372 Mortgage servicing income net of impairment 412 450 439 724 631 1,301 1,984 Increase in cash value of bank owned life insurance 349 318 298 658 1,055 965 3,051 Other income 780 380 827 1,019 964 1,987 1,675 Total non-interest income 11,511 10,485 9,929 (20,449 ) 11,830 31,925 32,447 Non-interest Expense Salaries and employee benefits 21,829 20,583 20,268 21,877 20,058 62,680 58,932 Net occupancy expenses 3,207 3,192 3,546 3,260 3,283 9,945 10,095 Data processing 2,977 2,579 2,464 2,942 2,999 8,020 8,684 Professional fees 676 714 607 772 707 1,997 1,873 Outside services and consultants 3,677 3,058 3,359 2,394 2,316 10,094 7,548 Loan expense 1,034 1,038 719 1,345 1,120 2,791 3,635 FDIC insurance expense 1,204 1,315 1,320 1,200 1,300 3,839 2,680 Core deposit intangible amortization 844 844 872 903 903 2,560 2,709 Other losses 297 515 16 508 188 828 543 Other expense 3,527 3,684 3,936 4,129 3,294 11,147 10,255 Total non-interest expense 39,272 37,522 37,107 39,330 36,168 113,901 106,954 Income /(Loss) Before Income Taxes 18,105 15,873 15,305 (18,796 ) 17,489 49,283 57,795 Income tax expense (75 ) 1,733 1,314 6,419 1,284 2,972 4,599 Net Income /(Loss) $ 18,180 $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 $ 46,311 $ 53,196 Basic Earnings /(Loss) Per Share $ 0.42 $ 0.32 $ 0.32 $ (0.58 ) $ 0.37 $ 1.06 $ 1.22 Diluted Earnings/(Loss) Per Share 0.41 0.32 0.32 (0.58 ) 0.37 1.05 1.21 Condensed Consolidated Balance Sheets (Dollars in Thousands) September 30,
2024June 30,
2024March 31,
2024December 31,
2023September 30,
2023Assets Interest earning assets Federal funds sold $ 113,912 $ 34,453 $ 161,704 $ 401,672 $ 71,576 Interest earning deposits 12,107 4,957 9,178 12,071 4,718 Interest earning time deposits 735 1,715 1,715 2,205 2,207 Federal Home Loan Bank stock 53,826 53,826 53,826 34,509 34,509 Investment securities, available for sale 541,170 527,054 535,319 547,251 865,168 Investment securities, held to maturity 1,888,379 1,904,281 1,925,725 1,945,638 1,966,483 Loans held for sale 2,069 2,440 922 1,418 2,828 Gross loans held for investment (HFI) 4,803,996 4,822,840 4,618,175 4,417,630 4,359,002 Total Interest earning assets 7,416,194 7,351,566 7,306,564 7,362,394 7,306,491 Non-interest earning assets Allowance for credit losses (52,881 ) (52,215 ) (50,387 ) (50,029 ) (49,699 ) Cash 108,815 106,691 100,206 112,772 98,843 Cash value of life insurance 37,115 36,773 36,455 36,157 149,212 Other assets 119,026 165,656 160,593 177,061 152,280 Goodwill 155,211 155,211 155,211 155,211 155,211 Other intangible assets 11,067 11,910 12,754 13,626 14,530 Premises and equipment, net 93,544 93,695 94,303 94,583 94,716 Interest receivable 39,366 43,240 40,008 38,710 37,850 Total non-interest earning assets 511,263 560,961 549,143 578,091 652,943 Total assets $ 7,927,457 $ 7,912,527 $ 7,855,707 $ 7,940,485 $ 7,959,434 Liabilities Savings and money market deposits $ 3,420,827 $ 3,364,726 $ 3,350,673 $ 3,369,149 $ 3,322,788 Time deposits 1,220,653 1,178,389 1,136,121 1,179,739 1,250,606 Borrowings 1,142,744 1,229,165 1,219,812 1,217,020 1,214,016 Repurchase agreements 122,399 128,169 139,309 136,030 142,494 Subordinated notes 55,703 55,668 55,634 55,543 59,007 Junior subordinated debentures issued to capital trusts 57,423 57,369 57,315 57,258 57,201 Total interest earning liabilities 6,019,749 6,013,486 5,958,864 6,014,739 6,046,112 Non-interest bearing deposits 1,085,535 1,087,040 1,093,076 1,116,005 1,126,703 Interest payable 11,400 11,240 7,853 22,249 16,281 Other liabilities 55,951 74,096 74,664 68,680 76,969 Total liabilities 7,172,635 7,185,862 7,134,457 7,221,673 7,266,065 Stockholders’ Equity Preferred stock — — — — — Common stock — — — — — Additional paid-in capital 358,453 357,673 356,599 356,400 355,478 Retained earnings 454,050 442,977 435,927 429,021 461,325 Accumulated other comprehensive income (loss) (57,681 ) (73,985 ) (71,276 ) (66,609 ) (123,434 ) Total stockholders’ equity 754,822 726,665 721,250 718,812 693,369 Total liabilities and stockholders’ equity $ 7,927,457 $ 7,912,527 $ 7,855,707 $ 7,940,485 $ 7,959,434 Loans and Deposits (Dollars in Thousands, Unaudited) September 30, June 30, March 31, December 31, September 30, % Change 2024 2024 2024 2023 2023 Q3'24 vs Q2'24 Q3'24 vs Q3'23 Commercial: Commercial real estate $ 2,105,459 $ 2,117,772 $ 1,984,723 $ 1,962,097 $ 1,916,056 (1 )% 10 % Commercial & Industrial 808,600 786,788 765,043 712,863 673,188 3 % 20 % Total commercial 2,914,059 2,904,560 2,749,766 2,674,960 2,589,244 — % 13 % Residential Real estate 801,356 797,956 782,071 681,136 675,399 — % 19 % Mortgage warehouse 80,437 68,917 56,548 45,078 65,923 17 % 22 % Consumer 1,008,144 1,051,407 1,029,790 1,016,456 1,028,436 (4 )% (2 )% Total loans held for investment 4,803,996 4,822,840 4,618,175 4,417,630 4,359,002 — % 10 % Loans held for sale 2,069 2,440 922 1,418 2,828 (15 )% (27 )% Total loans $ 4,806,065 $ 4,825,280 $ 4,619,097 $ 4,419,048 $ 4,361,830 — % 10 % Deposits: Interest bearing deposits Savings and money market deposits $ 3,420,827 $ 3,364,726 $ 3,350,673 $ 3,369,149 $ 3,322,788 2 % 3 % Time deposits 1,220,653 1,178,389 1,136,121 1,179,739 1,250,606 4 % (2 )% Total Interest bearing deposits 4,641,480 4,543,115 4,486,794 4,548,888 4,573,394 2 % 1 % Non-interest bearing deposits Non-interest bearing deposits 1,085,535 1,087,040 1,093,076 1,116,005 1,126,703 — % (4 )% Total deposits $ 5,727,015 $ 5,630,155 $ 5,579,870 $ 5,664,893 $ 5,700,097 2 % — % Average Balance Sheet (Dollars in Thousands, Unaudited) Three Months Ended September 30, 2024 June 30, 2024 September 30, 2023 Average
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Rate(4)Average
BalanceInterest(4) Average
Rate(4)Assets Interest earning assets Federal funds sold $ 64,743 $ 860 5.28 % $ 47,805 $ 645 5.43 % $ 92,305 $ 1,247 5.36 % Interest earning deposits 8,781 97 4.39 % 7,662 93 4.88 % 8,018 85 4.21 % Federal Home Loan Bank stock 53,826 1,607 11.88 % 53,827 1,521 11.36 % 34,509 618 7.10 % Investment securities - taxable (1) 1,301,830 6,526 1.99 % 1,309,305 6,465 1.99 % 1,650,081 8,170 1.96 % Investment securities - non-taxable (1) 1,125,295 7,987 2.82 % 1,132,065 8,072 2.87 % 1,220,998 8,863 2.88 % Total investment securities 2,427,125 14,513 2.38 % 2,441,370 14,537 2.39 % 2,871,079 17,033 2.35 % Loans receivable (2) (3) 4,775,788 75,828 6.32 % 4,662,124 72,208 6.23 % 4,280,700 63,254 5.89 % Total interest earning assets $ 7,330,263 $ 92,905 5.04 % $ 7,212,788 $ 89,004 4.96 % $ 7,286,611 $ 82,237 4.59 % Non-interest earning assets Cash and due from banks $ 108,609 $ 108,319 $ 100,331 Allowance for credit losses (52,111 ) (50,334 ) (49,705 ) Other assets 471,259 508,555 587,514 Total average assets $ 7,858,020 $ 7,779,328 $ 7,924,751 Liabilities and Stockholders' Equity Interest bearing liabilities Interest bearing deposits $ 3,386,177 $ 18,185 2.14 % $ 3,334,490 $ 16,814 2.03 % $ 3,267,594 $ 12,661 1.54 % Time deposits 1,189,148 12,602 4.22 % 1,134,590 11,633 4.12 % 1,271,104 12,043 3.76 % Borrowings 1,149,952 10,221 3.54 % 1,184,172 10,278 3.49 % 1,180,452 10,399 3.50 % Repurchase agreements 123,524 910 2.93 % 125,144 935 3.00 % 136,784 825 2.39 % Subordinated notes 55,681 830 5.93 % 55,647 829 5.99 % 58,983 880 5.92 % Junior subordinated debentures issued to capital trusts 57,389 1,230 8.53 % 57,335 1,213 8.51 % 57,166 1,227 8.52 % Total interest bearing liabilities $ 5,961,871 $ 43,978 2.93 % $ 5,891,378 $ 41,702 2.85 % $ 5,972,083 $ 38,035 2.53 % Non-interest bearing liabilities Demand deposits $ 1,083,214 $ 1,080,676 $ 1,159,241 Accrued interest payable and other liabilities 74,563 80,942 77,942 Stockholders' equity 738,372 726,332 715,485 Total average liabilities and stockholders' equity $ 7,858,020 $ 7,779,328 $ 7,924,751 Net FTE interest income (non-GAAP) (5) $ 48,927 $ 47,302 $ 44,202 Less FTE adjustments (4) 2,017 2,023 2,112 Net Interest Income $ 46,910 $ 45,279 $ 42,090 Net FTE interest margin (Non-GAAP) (4)(5) 2.66 % 2.64 % 2.41 % (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. (2) Includes fees on loans held for sale and held for investment. The inclusion of loan fees does not have a material effect on the average interest rate. (3) Non-accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. (4) Management believes fully taxable equivalent, or FTE, interest income is useful to investors in evaluating the Company's performance as a comparison of the returns between a tax-free investment and a taxable alternative. The Company adjusts interest income and average rates for tax-exempt loans and securities to an FTE basis utilizing a 21% tax rate (5) Non-GAAP financial metric. See non-GAAP reconciliation included herein for the most directly comparable GAAP measure. Credit Quality (Dollars in Thousands Except Ratios, Unaudited) Quarter Ended September 30, June 30, March 31, December 31, September 30, % Change 2024 2024 2024 2023 2023 3Q24 vs 2Q24 3Q24 vs 3Q23 Non-accrual loans Commercial $ 6,830 $ 4,321 $ 5,493 $ 7,362 $ 6,919 58 % (1 )% Residential Real estate 9,529 8,489 8,725 8,058 7,644 12 % 25 % Mortgage warehouse — — — — — — % — % Consumer 7,208 5,453 4,835 4,290 4,493 32 % 60 % Total non-accrual loans 23,567 18,263 19,053 19,710 19,056 29 % 24 % 90 days and greater delinquent - accruing interest 819 1,039 108 559 392 (21 )% 109 % Total non-performing loans 24,386 19,302 19,161 20,269 19,448 26 % 25 % Other real estate owned Commercial $ 1,158 $ 1,111 $ 1,124 $ 1,124 $ 1,287 4 % (10 )% Residential Real estate — — — 182 32 — % (100 )% Mortgage warehouse — — — — — — % — % Consumer 36 57 50 205 72 (37 )% (50 )% Total other real estate owned $ 1,194 $ 1,168 $ 1,174 $ 1,511 $ 1,391 2 % (14 )% Total non-performing assets $ 25,580 $ 20,470 $ 20,335 $ 21,780 $ 20,839 25 % 23 % Loan data: Accruing 30 to 89 days past due loans $ 18,087 $ 19,785 $ 15,154 $ 16,595 $ 13,089 (9 )% 38 % Substandard loans 59,775 51,221 47,469 49,526 47,563 17 % 26 % Net charge-offs (recoveries) Commercial (55 ) 57 (57 ) 233 142 (196 )% (139 )% Residential Real estate (9 ) (4 ) (5 ) 21 (39 ) (125 )% 77 % Mortgage warehouse — — — — — — % — % Consumer 439 534 488 531 619 (18 )% (29 )% Total net charge-offs 375 587 426 785 722 (36 )% (48 )% Allowance for credit losses Commercial 32,854 31,941 30,514 29,736 29,472 3 % 11 % Residential Real estate 2,675 2,588 2,655 2,503 2,794 3 % (4 )% Mortgage warehouse 862 736 659 481 714 17 % 21 % Consumer 16,490 16,950 16,559 17,309 16,719 (3 )% (1 )% Total allowance for credit losses $ 52,881 $ 52,215 $ 50,387 $ 50,029 $ 49,699 1 % 6 % Credit quality ratios Non-accrual loans to HFI loans 0.49 % 0.38 % 0.41 % 0.45 % 0.44 % Non-performing assets to total assets 0.32 % 0.26 % 0.26 % 0.27 % 0.26 % Annualized net charge-offs of average total loans 0.03 % 0.05 % 0.04 % 0.07 % 0.07 % Allowance for credit losses to HFI loans 1.10 % 1.08 % 1.09 % 1.13 % 1.14 % Non–GAAP Reconciliation of Net Fully-Taxable Equivalent ("FTE") Interest Margin (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Interest income (GAAP) (A) $ 90,888 $ 86,981 $ 85,264 $ 83,514 $ 80,125 Taxable-equivalent adjustment: Investment securities - tax exempt (1) 1,677 1,695 1,715 1,799 1,861 Loan receivable (2) 340 328 353 314 251 Interest income (non-GAAP) (B) 92,905 89,004 87,332 85,627 82,237 Interest expense (GAAP) (C) 43,978 41,702 41,976 41,257 38,035 Net interest income (GAAP) (D) =(A) - (C) 46,910 45,279 43,288 42,257 42,090 Net FTE interest income (non-GAAP) (E) = (B) - (C) 48,927 47,302 45,356 44,370 44,202 Average interest earning assets (F) 7,330,263 7,212,788 7,293,559 7,239,034 7,286,611 Net FTE interest margin (non-GAAP) (G) = (E*) / (F) 2.66 % 2.64 % 2.50 % 2.43 % 2.41 % (1) The following represents municipal securities interest income for investment securities classified as available-for-sale and held-to-maturity (2) The following represents municipal loan interest income for loan receivables classified as held for sale and held for investment *Annualized Non–GAAP Reconciliation of Return on Average Tangible Common Equity (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Net income (loss) (GAAP) (A) $ 18,180 $ 14,140 $ 13,991 $ (25,215 ) $ 16,205 Average stockholders' equity (B) 738,372 726,332 725,083 702,793 715,485 Average intangible assets (C) 166,819 167,659 168,519 169,401 170,301 Average tangible equity (Non-GAAP) (D) = (B) - (C) $ 571,553 $ 558,673 $ 556,564 $ 533,392 $ 545,184 Return on average tangible common equity ("ROACE") (non-GAAP) (E) = (A*) / (D) 12.65 % 10.18 % 10.11 % (18.76 )% 11.79 % *Annualized Non–GAAP Reconciliation of Tangible Common Equity to Tangible Assets (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Total stockholders' equity (GAAP) (A) $ 754,822 $ 726,665 $ 721,250 $ 718,812 $ 693,369 Intangible assets (end of period) (B) 166,278 167,121 167,965 168,837 169,741 Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 588,544 $ 559,544 $ 553,285 $ 549,975 $ 523,628 Total assets (GAAP) (D) 7,927,457 7,912,527 7,855,707 7,940,485 7,959,434 Intangible assets (end of period) (B) 166,278 167,121 167,965 168,837 169,741 Total tangible assets (non-GAAP) (E) = (D) - (B) $ 7,761,179 $ 7,745,406 $ 7,687,742 $ 7,771,648 $ 7,789,693 Tangible common equity to tangible assets (Non-GAAP) (G) = (C) / (E) 7.58 % 7.22 % 7.20 % 7.08 % 6.72 % Non–GAAP Reconciliation of Tangible Book Value Per Share (Dollars in Thousands, Unaudited) Three Months Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Total stockholders' equity (GAAP) (A) $ 754,822 $ 726,665 $ 721,250 $ 718,812 $ 693,369 Intangible assets (end of period) (B) 166,278 167,121 167,965 168,837 169,741 Total tangible common equity (non-GAAP) (C) = (A) - (B) $ 588,544 $ 559,544 $ 553,285 $ 549,975 $ 523,628 Common shares outstanding (D) 43,712,059 43,712,059 43,726,380 43,652,063 43,648,501 Tangible book value per common share (non-GAAP) (E) = (C) / (D) $ 13.46 $ 12.80 $ 12.65 $ 12.60 $ 12.00 Contact: John R. Stewart, CFA EVP, Chief Financial Officer Phone: (219) 814–5833 Fax: (219) 874–9280 Date: October 23, 2024 
